Quality Home lender asks court to prohibit company from using cash collateral

By Reshmi Basu

New York, Oct. 10 - Quality Home Loans lender First California Bank requested the court to prohibit the company from using cash collateral, contending that it owns the security, according to an emergency motion filed Wednesday with the U.S. Bankruptcy Court for the Central District of California.

In October, the court approved a transaction in which Quality Home will sell some of its servicing loan rights to Bayview Financial LP for $200,000.

According to the motion, First California argued that those funds should be segregated and sequestered since it constitutes the cash collateral of the bank.

In 2006, First California made a $400,000 loan to Quality Home. Under the agreement, any of Quality Home's indebtedness is secured by all of its assets, the lender noted in the motion.

First California made a written demand that the $200,000 be segregated. Since it has not received a response from Quality Home, the lender asked the court to intervene.

Quality Home Loans, an Agoura Hills, Calif., mortgage lender, filed for bankruptcy on Aug. 21. Its Chapter 11 case number is 07-13006.

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